Shanda shares slide after downgrade

Shares of Shanda Interactive Entertainment Ltd. tumbled Tuesday after an analyst lowered the stock to "Hold" on fears of a slowdown in revenue growth for the online video game operator.

Brean Murray Carret & Co. analyst Andrey Glukhov cut shares from "Buy," citing new regulations affecting online transactions and a disappointing performance from the multiplayer game "Aion."

Last week, the Chinese government issued rules aimed strengthening government supervision of the "virtual currencies" used in many online games.

Shanda, based in Shanghai, saw shares tumble $4.31, or 7.9 percent, to $51.40 in afternoon trading. The stock is up 72 percent since the start of the year.

"While we continue to view the company as one of the best operators in China, with arguably the best marketing capability," Glukhov said in a note, "we believe near term the stock may flatten as expectations readjust."

Glukhov also pointed to Shanda's decision to spin off Shanda Games, a unit that accounts for about 90 percent of its revenue, into a public subsidiary.

He said the company has "not properly articulating the purpose of the transaction" and "we believe investor confusion will only increase as we approach the timing of the deal."